Electronic copy available at: http://ssrn.com/abstract=1141885

Working PaperJune 2008

CORPORATE GOVERNANCE, THE TIMELINESS OF FINANCIAL REPORTING AND THE RUSSIAN BANKING SYSTEM: AN EMPIRICAL STUDY

Robert W. McGeeFlorida International University

Thomas TarangeloFlorida International University

INTRODUCTION

Transparency is one of those terms that have many facets. It is used in different ways. It can refer to the openness of governmental functions. It can refer to a country’s economy. Or it can refer to various aspects of corporate governance and financial reporting. The OECD (1998) lists transparency as one element of good corporate governance. Kulzick (2004) and others (Blanchet, 2002; Prickett, 2002) view transparency from a user perspective. According to their view, transparency includes the following eight concepts: accuracy, consistency, appropriateness, completeness, clarity, timeliness, convenience, and governance and enforcement. This paper focuses on just one aspect of transparency - timeliness.

The International Accounting Standards Board considers timeliness to be an essential aspect of financial reporting. In APB Statement No. 4, the Accounting Principles Board (1970) in the USA listed timeliness as one of the qualitative objectives of financial reporting disclosure. APB Statement No. 4 was later superseded but the Financial Accounting Standards Board continued to recognize the importance of timeliness in its Concepts Statement No. 2 (1980). The U.S. Securities and Exchange Commission also recognizes the importance of timeliness and requires that listed companies file their annual 10-K reports by a certain deadline.

The issue of timeliness has several facets. There is an inverse relationship between the quality of financial information and the timeliness with which it is reported (Kenley & Staubus, 1974). Accounting information becomes less relevant with the passage of time (Atiase, Bamber & Tse, 1989; Hendriksen & van Breeda, 1992; Lawrence & Glover, 1998).

Electronic copy available at: http://ssrn.com/abstract=1141885

REVIEW OF THE LITERATURE

Studies show mixed conclusions regarding the relationship of quickness of reporting and the nature of the information being reported. Some studies show that good news is reported before bad news whereas other studies show that bad news is reported before good news.

There is some evidence to suggest that it takes more time to report bad news than good news (Bates, 1968; Beaver, 1968), both because companies hesitate to report bad news and because companies take more time to massage the numbers or resort to creative accounting techniques when they have to report bad news (Givoli & Palmon, 1982; Chai & Tung, 2002; Trueman, 1990). Stated differently, there seems to be a tendency to rush good news to press, such as better than expected earnings, and delay the reporting of bad news or less than expected earnings (Chambers & Penman, 1984; Kross & Schroeder, 1984). Dwyer & Wilson (1989) found this relationship to hold true for municipalities. Haw, Qi and Wu (2000) found it to be the case with Chinese companies. Leventis and Weetman (2004) found it to be the case for Greek firms.

However, Annaert, DeCeuster, Polfliet & Campenhout (2002) found that this was not the case for Belgian companies and Han & Wang (1998) found that this was not the case for petroleum refining companies, which delayed reporting extraordinarily high profits during the Gulf crisis of the 1990s, perhaps because political repercussions outweighed what would otherwise have been a good market reaction. Rees & Giner (2001) found that companies in France, Germany and the UK tended to report bad news sooner than good news.

A study by Basu (1997) found that companies tend to report bad news quicker than good news, presumably because of conservatism. Gigler & Hemmer (2001) discuss this point in their study, which finds that firms with more conservative accounting systems are less likely to make timely voluntary disclosures than are firms with less conservative accounting systems.

Building upon the Basu study (1997), Pope and Walker (1997) found that there were cross-jurisdictional effects when extraordinary items were either included or excluded, using US and UK firms for comparison. Han & Wild (1997) examined the potential relationship between earnings timeliness and the share price reactions of competing firms. But Jindrichovska and Mcleay (2005) found that there was no evidence of conservatism in the Czech accounting system when it came to reporting bad news earlier than good news, presumably because the Czech tax system offers little incentive to do so. Ball, Kathari and Robin (2000) found that companies in jurisdictions that have a strong shareholder orientation tend to disclose earnings information sooner than companies in countries operating under a legal code system.

There is also a relationship between the speed with which financial results are announced and the effect the announcement has on stock prices. If information is released sooner, the effect on stock prices is more pronounced. The longer the time lapse between year-end and the release of the financial information, the less effect there is on stock price, all other things being equal (Ball & Brown, 1968; Brown & Kennelly, 1972). This phenomenon can be explained by the fact that financial information seems to seep into the stock price over time, so the more time that elapses between year-end and the release of the financial reports, the more such information is already included in the stock price.

Some countries report financial results faster than other countries. DeCeuster & Trappers (1993) found that Belgian companies take longer to report their financial results than do Anglo-Saxon countries. Annaert, DeCeuster, Polfliet & Campenhout (2002) found this to be the case for interim information as well. Companies can report financial results faster on the internet and the information can be more widely disbursed but posting two-year-old annual reports does nothing to improve timeliness (Ashbaugh, Johnstone & Warfield, 1999).

Atiase, Bamber & Tse (1989) found that large companies report earnings faster than small companies and that the reporting of earnings has a more significant market reaction for small firms than for large firms. In a study of Australian firms, Davies & Whittred (1980) found that small firms and large

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firms made significantly more timely reports than medium-size firms and that profitability was not a significant variable.

Whittred (1980) found that the release of financial information for Australian companies is delayed the first time an audit firm issues a qualified report and that the extent of the delay is longer in cases where the qualification is more serious. Keller (1986) replicated that study for US companies and found the same thing to be true. Whittred and Zimmer (1984) found that it took Australian firms in financial distress a significantly longer time to publish their financial information. A study of more than 5,000 annual reports of French companies found that it took longer to release audit reports where there had been a qualified opinion, and that the more serious the qualification, the greater the delay in releasing the report (Soltani, 2002).

Krishnan (2005) found that the audit firm’s degree of expertise has an effect on the timeliness of the publication of bad earnings news. Audit firms that specialize in the industry in which the company operates are timelier in reporting bad financial news than are audit firms that have less industry expertise.

A few studies have been published that compare the timeliness of financial reporting in transition economies and the more developed market economies. McGee (2006, 2007b) found that companies in the Russian energy sector take a significantly longer amount of time to report financial results than do non-Russian companies in the energy sector. Another study found the same thing to be true of the Russian telecom industry (McGee, 2007a). A comparative study of Chinese and non-Chinese companies found that Chinese companies took significantly longer to report than non-Chinese companies (McGee & Yuan, 2008). But a study comparing new EU countries that are also transition economies to EU countries that are not transition economies found no difference in timeliness (McGee & Igoe, 2008).

METHODOLOGY Timeliness was determined by counting the number of days that elapsed between year-end and

the date of the auditor’s report. Some data was gathered from www.rustocks.com, a website that contains a wealth of information on Russian companies. Other data was gathered by going directly to the Russian company websites or www.sec.gov.

Such a methodology is less than perfect for several reasons. For one, the date on the audit report might not be the same as the date the information was released to the general public. However, there is no way to obtain the date the information was released to the general public, so the date on the audit report acted as a surrogate for the actual release date.

Secondly, the sample only consisted of annual reports that were in the English language. However, this skewed sample does not constitute a fatal flaw, since it is likely that Russian banks that do not publish their financial statements in the English language are not seeking foreign investment anyway, so having a sample that consists of only English language annual reports actually does a good job of capturing the banks that are most likely looking for foreign capital. It is this group that is most likely to be concerned with the timeliness of financial reporting. Banks that are not trying to attract foreign capital have little or no pressure to publish their financial statements in any language, even though Russian law requires it, since the penalties for noncompliance are slight or none.

Another possible criticism of the present study is that some Russian banks report only one or two years worth of data while others publish 10 or more years of data. Analyzing data where the sample population differs by year is not as desirable as analyzing data where the sample sizes by year are about the same. However, the sample population was small to begin with, so the authors decided that it was better to enlarge the sample size even if that meant having sample sizes that differed by year. The alternative would have been to be forced to work with a much smaller sample size. In the few cases where banks reported more than 10 years of data, the authors selected only the 10 most recent years. Financial reporting practiced in Russia and other former Soviet republics has changed drastically since the implosion of the Soviet Union and it was thought that using data that was more than 10 years old would not provide a fair reflection of current accounting practices.

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The data found was sometimes incomplete. Some annual reports disclosed the date of the audit report but not the auditor, or the auditor but not the date of the audit report. Some annual reports disclosed the accounting principles used while others did not. In cases where the company issued consolidated financial statements and also separate financial statements, the authors chose the date of the audit report for the consolidated financial statements.

FINDINGS

Days Reporting Delay Table 1 shows the data for all years. Data were found for 73 Russian banks. The sample size was

254, meaning that the authors could find 254 usable annual reports. The range was 18 to 346 days, meaning that one Russian bank had an audit report date that was

18 days after year-end while another Russian bank had an audit report dated 346 days after year-end. The arithmetic mean for all years was 98.8 days, which means that the average Russian bank with a December 31 year-end had an audit report dated April 9. The median for all years was 104 days, or April 14, meaning that half of the Russian banks had an audit report date before April 14 and half had a date after April 14.

To place things in perspective it would be useful to compare the measures of central tendency for Russian banks and non-Russian banks. We did not do that in the present study because of time constraints. However, studies that used this methodology to determine the timeliness of financial reporting for non-Russian companies found that it took fewer days for non-Russian companies to issue an audit report. The specifics are as follows:

145.5 days for Russian companies in the energy sector vs. 70.2 days for non-Russian energy companies (McGee 2007b)

138.3 days for Russian telecom companies vs. 63.2 days for non-Russian telecom companies (McGee 2007a)

136.6 days for Russian companies in various industries (McGee 2007c)

A few studies of non-Russian companies have also computed the number of days it takes to issue an audit report after year-end. The statistics for Chinese vs. non-Chinese companies and new EU entrants vs. old EU member countries are given below.

92.1 days for Chinese companies vs. 65.5 days for non-Chinese companies (McGee & Yuan 2008)84.7 days for new EU entrants that are transition economies vs. 85.6 days for old EU member countries

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Table 1Sample Statistics – All Years

Sample Size

Number of Banks 73

Years of Data 254

Measures of Central Tendency

Range [January 18-December 12] 18-346 days

Mean [April 9] 98.8 days

Median [April 14] 104 days

Chart 1 shows the range of days for Russian banks.

Chart 1 Range of Days - Russian Banks

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400

Day

s

Although no studies have ever been done to our knowledge that compute the number of days delay in issuing audit opinions for non-Russian banks, it would be useful to compare data for the studies of timeliness that have been done.1 Table 2 summarizes the results of prior studies.

1 The authors are working on such a study. The results will be published in Robert W. McGee, Corporate Governance in Transition Economies, New York: Springer (2008 or 2009).

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Table 2Days DelayFindings from Prior Studies

RANK SAMPLE DAYSDELAY

1 Non-Russian telecom (McGee 2007a) 63.2

2 Non-Chinese companies (McGee & Yuan 2008) 65.5

3 Non-Russian energy (McGee 2007b) 70.2

4 New EU countries (McGee & Igoe 2008) 84.7

5 Old EU countries (McGee & Igoe 2008) 85.6

6 Chinese companies (McGee & Yuan 2008) 92.1

7 Russian banks (present study) 98.8

8 Russian companies (McGee 2007c) 136.6

9 Russian telecom (McGee 2007a) 138.3

10 Russian energy (McGee 2007b) 145.5

It is not surprising that Russian companies in general take longer to report financial information, since they are relatively new to the financial reporting game. It is also not surprising that Russian banks do a better job of reporting financial information in a timely fashion than do Russian companies in other industries, since transition economies have a tendency to reform financial reporting practices in the banking sector first, before attention is paid to accounting reform in other sectors of the economy. What is slightly surprising is that Chinese companies in general are faster at reporting financial results than are Russian banks. If one were to do a study of the Chinese banking industry, this difference would likely be even more pronounced, since the banking industry in transition economies tend to have better financial reporting practices than the average industry.

Chart 2 shows the differences graphically.

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Chart 2 Days Delay - Study Comparison (mean scores)

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160

Non-RussianTelecom

Non-Chinese

Non-RussianEnergy

New EU Old EU ChineseCos.

RussianBanks

RussianCos.

RussianTelecom

RussianEnergy

Day

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The above data on Russian banks combines all the data collected. Some of that data is as old as 1998 while some is as recent as 2007. If there is any kind of trend it would be impossible to spot it, given the fact that the data are combined. If the data could be disaggregated it might be possible to spot a trend. One might assume that the timeliness of financial reporting for Russian banks would get better over time, but that is just an assumption. It can be tested by examining the data for each year individually. Table 3 does that.

Table 3Timeliness Data for Russian Banks by Year

YEAR SAMPLE SIZE

LOW HIGH MEAN MEDIAN

1998 2 113 182 147.5 147.5

1999 4 42 174 87.8 67.5

2000 9 45 180 89.3 73.0

2001 13 44 184 90.2 81.0

2002 25 45 232 108.9 100.0

2003 41 29 346 108.1 86.0

2004 53 18 270 113.5 98.0

2005 51 31 181 108.0 104.0

2006 56 51 258 118.6 117.0

2007 2 81 107 94.0 94.0

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Sample sizes for some years are too small to draw any conclusions but the sample sizes for other years are sufficiently large to draw some tentative conclusions. Chart 3 shows the median scores graphically for all years that had a sample size larger than 10. It was thought that examining median scores would be more meaningful than looking at mean scores, since outliers could distort mean scores but would not distort median scores.

The results are somewhat surprising. One would think that the Russian banking sector, which is probably one of the most advanced sectors in terms of financial reporting, would become timelier in its financial reporting practices over time. But Chart 3 shows that just the opposite has happened. With the exception of 2002, it has taken more time to report financial results with each succeeding year.

Chart 3 Timeliness Trend (median scores)

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104117

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2001 2002 2003 2004 2005 2006

Day

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By looking at the bar chart one might easily conclude that the trend is to take significantly more time to report financial results over time. However, one need not be content with a conclusion that is reached solely by visual inspection of the data. One may take a more scientific approach. Submitting the data to a nonparametric test such as the Wilcoxon Test could provide further evidence of a significant trend. Table 4 shows the results of those tests.

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Table 4Tests of Significance

YEARS COMPARED p Value

2001 v. 2002 0.2301

2001 v. 2003 0.3215

2001 v. 2004 0.156

2001 v. 2005 0.1167

2001 v. 2006 0.01967 *

2003 v. 2004 0.4103

2003 v. 2005 0.2907

2003 v. 2006 0.04384 *

2004 v. 2005 0.9974

2004 v. 2006 0.3013

2005 v. 2006 0.1759

* Significant at 5% level

A statistical analysis shows that the trend, if measured from 2001 to 2006, is significant at the 5 percent level. The trend for the shorter period of 2003 to 2006 is also significant at the 5 percent level. Thus, it can be concluded that the trend in the Russian banking industry is to take more time to report financial results with each passing year.

Auditor Another bit of data worth examining is which audit firms audit Russian banks. Prior studies have

found that the Big-4 accounting firms have a dominant position in the audit of large Russian and Ukrainian companies (McGee & Preobragenskaya 2005 & 2006). It is reasonable to expect that the Big-4 have a dominant position in the Russian banking industry. Table 5 shows the relative frequency for the various audit firms where information was available. In some cases the audit firm could not be determined.

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Table 5Audit Firm - All Years

# %

Audit Ltd. (a Russian firm) 2 0.7

BDO Unicon 2 0.7

Deloitte & Touche 61 22.8

Ernst & Young 41 15.4

Grant Thornton 2 0.7

KPMG 52 19.5

OOO Audit (a Russian firm) 2 0.7

PKF ( a large Russian firm) 4 1.5

PricewaterhouseCoopers 73 27.3

Other Russian 28 10.5

Total 267

Table 6 shows the concentration for the Big-4 accounting firms.

Table 6Market Share of Big-4 Firms

FIRM % OF TOTAL

CUMULATIVE %

PricewaterhouseCoopers 27.3 27.3

Deloitte & Touche 22.8 50.1

KPMG 19.5 69.6

Ernst & Young 15.4 85.0

Table 6 shows that the Big-4 firms are clearly dominant with 85 percent of the banking market. However, these data do not report on the whole banking market but only that segment of the banking market that issues English language financial statements. This segment is also the segment represented by large international banks. Chart 4 shows the extent of Big-4 dominance graphically.

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Chart 4 Big-4 Market Share (all years)

PWC, 27.3

DT, 22.8KPMG, 19.5

EY, 15.4

Other, 15

The above analysis of audit firm dominance used data for several years, some going back as far as 1998. Perhaps dominance for the most recent year is difference from the weighted average dominance analyzed above. Audit firm data for the most recent year is shown in Table 7. In a few cases the audit firm issuing the auditor’s report could not be determined.

Table 7Audit Firm - Most Recent Year

# %

BDO Unicon 1 1.4

Deloitte & Touche 18 26.1

Ernst & Young 12 17.4

Grant Thornton 1 1.4

KPMG 12 17.4

PKF 1 1.4

PricewaterhouseCoopers 15 21.7

Other Russian 9 13.0

Total 69

Table 8 shows the market share for each of the Big-4 firms for both the most receipt year and on a weighted average basis. As can be seen, market dominance has declined somewhat, from 85 percent on a weighted average basis to 82.6 percent for the most current year reported. The relative market share increased for Deloitte & Touche and Ernst & Young and declined for the other two Big-4 firms. Chart 5 shows the relative market share of the Big-4 firms for the most recent year reported.

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Chart 5 Big-4 Market Share (most recent year)

DT, 26.1

PWC, 21.7

EY, 17.4

KPMG, 17.4

Other, 17.4

It is reasonable to expect that a decline in market share would occur over time. When the Russian banking system first opened up to the West, none of the Russian audit firms had sufficient expertise in International Accounting Standards to conduct audits of banks that issued financial statements using IAS. Banks had to go to the Big-4 (or Big-5 in the early days) or other international accounting firms like Grant Thornton or BDO Seidman. With the passage of time, Russian audit firms because more educated in IAS and were in a better position to audit banks and other companies that issue IAS based financial statements.

Table 8Market Share of Big-4 Firms Most Current Year and Weighted Average

FIRM % OF TOTAL (weighted average)

% OF TOTAL(current year)

CUMULATIVE %(current year)

Deloitte & Touche 22.8 26.1 26.1

PricewaterhouseCoopers 27.3 21.7 47.8

KPMG 19.5 17.4 65.2

Ernst & Young 15.4 17.4 82.6

Accounting Standards Used It is reasonable to expect that a high percentage of Russian banks that want to go into

international capital markets would use one of the two internationally known and respected set of

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accounting standards – International Financial Reporting Standards (IFRS) or U.S. GAAP. With the world trend moving toward IFRS and away from U.S. GAAP it could be expected that IFRS is taking on an increasingly dominant position over time. All Russian companies are required to use Russian Accounting Standards (RAS) for domestic purposes but there is no rule that precludes them from issuing financial statements using other accounting standards as well.

Table 9 shows the relative popularity of issuing English language financial statements for all the years under study. For some years it could not be determined which set of accounting standards were used to prepare the annual financial statements. As can be seen, issuing English language financial statements using IAS/IFRS is by far the most popular option.

Table 9Accounting Standards Used – All Years

Standard # %

IAS/IFRS 204 78.2

RAS 50 19.2

USGAAP 7 2.7

Total 261

Table 10 shows the relative popularity for the most recent year reported. As can be seen, the trend seems to be toward issuing financial statements using IFRS. The percentage of statements issued using either Russian or US accounting standards has declined over time, as might be expected. Chart 6 shows the relative frequencies for the most recent period graphically.

Table 10Accounting Standards Used – Most Recent Year

Standard # %

IAS/IFRS 56 83.6

RAS 10 14.9

USGAAP 1 1.5

Total 67

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Chart 6 Use of Accounting Standards (most recent year)

IFRS, 83.6

RAS, 14.9

US GAAP, 1.5

Table 11 shows the data used to make the present study.

Table 11Sample DataCOMPANY NAME YEAR DAYS AUDITOR STANDARDSABSOLUT BANK 2006 60 PWC IFRS

2005 62 PWC IFRS2004 73 PWC IFRS2003 89 PWC IFRS2002 79 PWC IFRS2001 N/A PWC IAS

AK BARS BANK 2006 118 PWC IFRS2005 174 PWC IFRS2004 168 PWC IFRS

ALFA BANK 2006 115 PWC N/A2005 N/A N/A N/A2004 98 PWC IFRS2003 111 PWC IFRS2002 N/A N/A N/A2001 N/A N/A N/A2000 106 PWC N/A1999 174 PWC N/A1998 182 PWC N/A

ALTA BANK 2005 157 KPMG IFRS2004 171 KPMG IFRS

APR BANK 2005 86 R R

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2004 69 R R2003 82 R R2002 56 R R2001 N/A R R2000 45 R R1999 52 R R

BANK AVANGARD 2006 117 DT IFRS2005 97 DT IFRS2004 91 DT IFRS2003 86 DT IFRS2002 94 DT IAS2001 102 DT IAS2000 73 DT R

BANK ELECTRONIKA 2006 156 DT IFRS2005 137 DT IFRS2004 143 DT IFRS2003 118 DT IFRS2002 90 DT IFRS

BANK OF MOSCOW 2006 86BDO UNICON IFRS

BANK PETROCOMMERCE 2006 102 PWC R2005 104 PWC R2004 N/A PWC N/A2003 146 KPMG N/A

BANK SNORAS 2004 63 EY N/A

BANK SOYUZ 2006 118 DT IFRS2005 159 PWC IFRS2004 178 PWC IFRS2003 204 PWC IFRS

BANK VOZROZHDENIYE 2006 82 PWC IFRS2005 90 PWC IFRS2004 144 PWC IFRS2003 145 PWC IFRS2002 118 PWC IFRS2001 135 PWC IAS2000 135 PWC IAS

BIN BANK 2006 100 DT IFRS2005 83 DT IFRS2004 63 DT IFRS

COMMERZBANK (EURASIJA) 2006 107 PWC R2005 104 PWC R2004 124 PWC R

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2003 N/A PWC R

CONVERSBANK 2004 120 EY IFRS2003 77 EY R

CONVERSBANK FINANCIAL 2006 N/A N/A N/AGROUP 2005 151 EY IFRS

2004 120 EY IFRS2003 77 EY IFRS2003 77 EY R

CREDIT BANK OF MOSCOW 2006 110 KPMG GAP/US2005/2004 97 KPMG GAP/US2004/2003 82 KPMG GAP/US2003/2002 76 KPMG GAP/US

DENIZBANK FINANCIAL SERVICE 2005 47 KPMG IFRSGROUP 2004 47 KPMG IFRS

2003 29 R IFRS

DENIZBANK MOSCOW 2005 31 GT IAS(DEXIA BANK) 2004 18 GT IAS

2003 42 R IAS

EVROFINANCE MOSNARBANK 2006 160 DT IFRS2005 N/A N/A N/A2004 63 AUDIT LTD R

2003 86OOO AUDIT R

2002 79AUDIT LTD. R

2001 70OOO AUDIT R

FUNDSERVICE BANK 2006 145 PWC IFRS2005 156 PWC IFRS2004 N/A PWC IFRS

GARANTI BANK OF MOSCOW 2006 58 KPMG IFRS2005 52 KPMG IFRS2004 63 KPMG IFRS2003 71 KPMG IFRS

GAZPROMBANK 2006 178 DT IFRS2005 181 DT IFRS2004 117 DT IFRS2003 113 DT IFRS2002 115 DT IAS2001 81 KPMG R2000 47 KPMG R1999 83 KPMG R

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1998 113 KPMG R

GLOBEXBANK 2006 170 RA IFRS2005 177 RA IFRS2004 270 RA IFRS

HOUSING FINANCE BANK 2004 74 N/A IFRS2003 106 N/A IFRS2002 152 N/A IFRS

INTERNATIONAL INDUSTRIAL 2006 148 DT IFRSBANK 2005 N/A DT N/A

2004 N/A DT N/A

INTERNATIONAL JOINT STOCK 2006 170 R IFRSBANK 2005 N/A R R

2004 N/A R R

INTERNATIONAL MOSCOW 2006 53 EY IFRSBANK (IMB) 2005 53 EY IFRS(UniCredit Bank) 2004 46 EY IFRS

2003 49 EY IFRS2002 45 KPMG IAS2001 44 KPMG IAC2000 45 KPMG IAC1999 N/A KPMG IAC

INTERPROM BANK 2006 117 DT R2005 N/A N/A N/A2004 35 DT R2003 N/A DT R2002 N/A N/A N/A2001 63 PWC R

INTERREGIONAL INVESTMENT 2006 258 R RBANK 2005 N/A R R

INVESTMENT TRADE BANK 2006 150 KPMG IFRS2005 135 KPMG IFRS2004 115 KPMG IFRS2003 346 KPMG IFRS

KMB BANK (SMALL BUSINESS 2006 61 EY IFRSCREDIT BANK) 2005 59 PWC IFRS

2004 60 PWC IFRS2003 65 EY IFRS2002 115 PWC IFRS2001 70 PWC IFRS

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LANTA BANK 2006 N/A R R2005 107 R N/A2004 94 EY R

LOCKO BANK 2006 86 KPMG IFRS2005 83 KPMG IFRS2004 74 KPMG IFRS2003 75 KPMG IFRS2002 56 KPMG IFRS2001 184 KPMG IFRS2000 180 KPMG IFRS

MDM BANK 2007 81 KPMG IFRS2006 92 KPMG IFRS2007 107 KPMG IFRS

MDM FINANCIAL GROUP 2006 92 KPMG IFRS2005 107 KPMG IFRS2004 151 KPMG IFRS2003 138 KPMG IFRS2002 143 PWC IFRS2001 116 PWC IAS

MEZHTOPENERGOBANK 2006 178 KPMG IFRS2005 177 KPMG IFRS2004 227 KPMG IFRS2003 208 KPMG IFRS2002 232 KPMG IFRS

MOSCOW BANK FOR 2006 118 DT IFRSRECONSTRUCTION & DEV'MENT 2005 69 DT IFRS(MBRR) 2004 98 DT IFRS

2003 64 DT R2002 108 DT R2001 N/A DT R

MOSKOMMERTSBANK 2006 73 DT IFRS2005 59 DT IFRS2004 28 N/A IFRS2003 43 N/A IFRS

MY BANK GROUP 2006 155 R IFRS

NATIONAL FACTORING COMPANY 2006 53 EY IFRS

2005 46 EY IFRS2004 213 EY IFRS

NESHPROMBANK 2006 N/A R IFRS2005 N/A R IFRS

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NOMOS-BANK 2006 136 DT IFRS(NOVAYA MOSKVA) 2005 82 DT IFRS

2004 81 DT IFRS2003 72 DT IFRS2002 66 DT IAS2001 60 N/A IAS

NOTA-BANK 2006 180 PWC IFRS

ORGRESBANK 2006 110 PWC IFRS2005 90 PWC IFRS

PROMSVYAZBANK 2006 N/A N/A N/A2005 137 KPMG N/A

ROS DOR BANK 2006 N/A PWC IFRS

ROSBANK 2006 114 DT R2005 108 DT R2004 N/A N/A N/A2003 72/118 DT IFRS2002 66 DT IAS2001 N/A DT R2000 58 DT R

ROSSELKHOZBANK 2006 113 PWC IFRS(RUSSIAN AGRICULTURAL) 2005 116 PWC IFRS

2004 171BDO UNICON IFRS

2003 212 PWC IFRS2002 166 PWC IFRS2001 105 PWC IAS

ROSSIYSKIY KREDIT BANK 2006 180 KPMG N/A

RUSS-BANK 2006 130 DT IFRS2005 146 DT IFRS2004 91 DT IFRS

RUSSIAN BANK FOR 2006 71 DT RDEVELOPMENT 2005 104 DT US

2004 77 DT US2003 51 DT US

RUSSIAN DEVELOPMENT BANK 2006 166 EY IFRS2005 118 RA RA2004 56 RA RA2003 N/A N/A N/A

RUSSIAN STANDARD BANK 2006 92 PWC IFRS2005 100 PWC IFRS

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2004 N/A N/A N/A2003 61 PWC IFRS2002 90 PWC IFRS2001 84 PWC IAS2000 115 PWC IAS1999 42 N/A IAS

RUSSKY SLAVIANSKY BANK 2006 134 PWC IFRS(RUSSALBANK) 2005 137 PWC IFRS

2004 145 PWC IFRS

SBERBANK 2006 115 PWC IFRS(SAVINGS BANK OF THE 2005 110 PWC IFRSRUSSIAN FEDERATION) 2004 151 EY IFRS

2003 177 EY IFRS2002 175 U IFRS

SDM BANK 2006 92 PKF? IFRS2005 130 PKF? IFRS2004 183 PKF? IFRS2003 212 PKF? IFRS

SEVERO-VOSTOCHY ALLIANCE 2006 130 R R2005 N/A N/A N/A2004 N/A N/A N/A2003 85 PWC IFRS2002 74 PWC IFRS

SOBINBANK 2006 N/A RA R2005 N/A RA R2004 110 RA R2003 110 PWC R2002 100 PWC R

SOCGORBANK 2006 113 PWC IFRS2005 90 PWC IFRS2004 82 PWC IFRS

SUDOSTROITELNY BANK 2006 51 DT IFRS(COMMERCIAL BANK) 2005 90 DT IFRS

2004 269 PWC IFRS2003 182 PWC IFRS2002 212 PWC IFRS

SVIAZ-BANK 2006 127 DT N/A2005 69 DT IFRS2004 152 DT IFRS

TEMBR-BANK (Commercial Fuel 2004 91 N/A N/Aand Energy Bank for Reconstruction)

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TRANSCAPITAL BANK 2006 61 DT IFRS

TRANSCREDIT BANK 2006 75 EY IFRS2005 86 EY IFRS2004 90 EY IFRS2003 78 EY IFRS2002 77 EY IFRS

TRUST INVESTMENT BANK 2006 159 KPMG IFRS2005 79 KPMG IFRS2004 126 KPMG IFRS2003 65 KPMG IFRS

UNIASTRUM BANK 2005 174 KPMG IFRS2004 207 KPMG IFRS2003 86 N/A N/A

URAL SIBERIAN BANK 2006 135 EY IFRS2005 142 EY IFRS2004 77 EY IFRS

VNESHECONOMBANK 2006 127 EY IFRS2005 95 EY IFRS2004 98 EY IFRS2003 N/A N/A N/A2002 N/A N/A N/A2001 59 EY IAS2000 N/A EY IAS1999 N/A N/A N/A1998 N/A EY N/A

VNESHTORGBANK 2006 97 EY IFRS(BANK FOR FOREIGN TRADE) 2005 114 EY IFRSVTB GROUP 2004 136 EY IFRS

2003 128 EY IFRS2002 108 PWC IFRS

ZENIT BANK 2002 106 EY IFRS

CONCLUDING COMMENTS

Some of the findings of the present study could be expected while others were surprising. Although the Russian banking industry does not report financial results as fast as do companies in the more developed market economies, it reports in a timelier manner than some other Russian industries. Newly admitted EU members, including former Soviet republics like Latvia, Lithuania and Estonia, have advanced their financial reporting to the point where it is indistinguishable from that of the older EU member states. Financial reporting in the Russian banking sector seems to be moving backwards rather

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than forward in terms of timeliness. There seems to be a shift toward IFRS and the Big-4 accounting firms, while continuing to be dominant, have lost some market share in recent years.

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